Monday, July 27, 2015

A little gold...

Bought some GLD ETF today.

I remembered 2-3 years ago, I read the production cost of gold is USD $1300. I got a surprise to see gold at such low.(Less than USD $1100)

I look up the internet and realized the top 10 gold miners/ producers are having AISC close to or even above current gold prices.

There are also plenty of debate about the adequacy of AISC (all in sustaining cost) and the actual cost should be higher.

But lets just take AISC, a metric develop by world gold council to account for the realistic costs of production, at face value.

See http://www.mining.com/top-gold-producers-margins-squeezed/

At USD $1200 per ounce, there are already plenty of news article a year ago saying that some miners will not be able to sustain production.

I took a brief look at the various presentations of Barrick, Newmount and Sabanye Gold, and notice that ASIC is falling since 2012, and I believe that is due to reduction in exploration capex, although I am not sure if all companies include this exploration capex under sustaining capex.

We are defintely not near the peak of the gold cycle, but the trough or how long the low will lasts is everybody guess.

I remember during crisis period, gold price is exploding, so I bought some as a hedge.

Price of Gold

An article that I read pointed out that Gold Bear Market is extremely long while gold bull is short. In fact, there are many articles (Just google "gold investment") that ask people to stay out and let the low take it course.

Also Warren Buffet has a very low opinion of Gold as an investment

http://www.usatoday.com/story/money/2014/09/21/why-warren-buffett-hates-gold/15909821/

Nonetheless, as major currencies are all fiat currencies, and a roaming currency tension brewing, I hardly think Gold will lose it relevance soon.

I wonder why all the emphasizes are on the low oil price but no one really give a hoot about gold.

Gold ETF pays no dividends too.

10 comments:

  1. Hi SI,

    Take a look at silver too. ;)

    ReplyDelete
    Replies
    1. Hi Derek

      Oh Ok ... Will do so. But think I will like Kyith says, read up more on gold first.

      Maybe u can give me some of your thoughts first?

      Delete
    2. Hi SI,

      There is not much to research or perhaps I should say there is too much information. There will always be two camps sharing extensively why it will go north or south. It is how convinced you are by their 'research'.

      I bought silver because like you it is hitting 52 week low, probably due to a stronger greenback and slowing output from China - silver is used for industrial purposes too. As Lazy Cat has shared, there is no dividends and it could remain stagnant for years to come. It's important to look at your portfolio and decide how much you want to allocate into it.

      Delete
    3. Indeed,

      It is just 10% of my portfolio, if cash is include in this port, this it is 5%. I seriously think I will not lose any sleep even if it fall another 20% . although I hardly think it will

      Delete
  2. i think you need to read more. the articles asking people to stay out of gold have been ongoing for 3 to 4 years. hope this is not a confirmation bias on your part.

    ReplyDelete
    Replies
    1. Hi Kyith,

      Thanks for the "warning" i will read up more. Definitely confirmation bias at play here.

      Any particular links to start off?

      Delete
  3. No dividends, expense ratio and long bear period... Opportunity costs?

    ReplyDelete
    Replies
    1. Hi Lazy Cat, assuming I am right about gold as a hedge, the opp cost will be gone at the "right time"

      But I will continue to read ...

      Delete
  4. When you mentioned GLD ETF, are you referring to GLD US$ (O87) from SGX counter?

    ReplyDelete